COMPETITION COMMISSION SOUTH AFRICA
MEDIA RELEASE NO 6 OF 2005
22 March 2005
COMPETITION COMMISSION REFERS COMPLAINTS AGAINST VEHICLE TRACKING AND RECOVERY COMPANIES AS WELL AS MANUFACTURERS OF GEARLOCK AND ALARM/IMMOBILIZERS TO COMPETITION TRIBUNAL FOR RULING
The Competition Commission (“the Commission”) has referred two complaints involving possible collusion and collective abuse of dominance against 5 vehicle tracking and recovery companies and 15 manufacturers of mechanical gearlocks and electronic alarm/immobilizers to the Competition Tribunal (“the Tribunal”) for adjudication. These companies are members of the Vehicle Security Association of South Africa (“VESA”), allegedly the only standards and regulation body dedicated to promoting and protecting the vehicle security industry and consumers in South Africa. The Commission’s investigation followed complaints that were lodged against these companies by Tracetec (Pty) Ltd (“Tracetec”) and Ivan Miller t/a CB Radio Installation Services.
Tracetec, which operates a vehicle and movable asset identification, tracking and recovery system, alleged that Netstar (Pty) Ltd (“Netstar”), Matrix Vehicle Tracking (Pty) Ltd (“Matrix”), Tracker (Pty) Ltd (“Tracker”), Global Telematics SA (Pty) Ltd (“Orchid”) Bandit Ltd (“Bandit”) are using the VESA committees as a platform for collusion and collective abuse of dominance within the vehicle tracking system industry. Collectively, these respondents hold almost 100% of the relevant market of supplying products and services for the tracking and recovery of motor vehicles in South Africa. This makes them the only significant competitors in this relevant market, the most dominant players being Netstar (46,2%) and Tracker (39,8%).
Furthermore, it is alleged that these companies within the VESA Stolen Vehicle Recovery Committee determine the membership criteria for VESA accreditation, thereby raising barriers to entry into VESA. It is also alleged that it is almost impossible for other competitors to enter the market for vehicle tracking and recovery without VESA accreditation, as VESA accreditation is required to qualify for insurance related work.
The other complainant, CB Radio Installation Services, which is a small business that specialises in the installation of gearlocks, immobilisers and car radios, alleged that VESA implemented a non-supply initiative, whereby VESA members were not allowed to supply products such as alarms, gearlocks etc. to non-VESA fitment centres, thereby excluding new entrants from the market for immobilising security devices. However, the Commission established that the said initiative was never implemented.
The Commission’s investigation established that there were contraventions of the Competition Act, however, only the Competition Tribunal can make the determination on whether the respondents are guilty or not. It appears that VESA members within the Stolen Vehicle Recovery Committee agreed on accreditation requirements for new applicants into the committee in a manner that excluded any new entrants to the market from receiving VESA approval. It was also found that the respondents have engaged in a restricted horizontal practice as referred to in section 4(1)(a), as well as a prohibited exclusionary act as referred to in section 8(c) of the Competition Act, in that the agreement between or concerted practice by the respondents impeded or prevented Tracetec and other competitors from entering or expanding within the market for the supply of products and services for the tracking and recovery of motor vehicles in South Africa. This exclusive conduct in the industry further entrenched the dominance of Netstar and Tracker to the detriment of other competitors or potential competitors.
When commenting on the above referral, the Commissioner, Advocate Simelane, stated that ”the impact of the respondent’s conduct to SMEs and new entrants is serious and requires urgent attention. It is for this reason that we ask the Tribunal to declare this conduct a prohibited practice so that smaller players such as Tracetec can have an opportunity to enter and expand in the market. Such ruling would send a message to other industries that any conduct that result in the creation of artificial entry barriers for upcoming businesses is not acceptable. There is also a need to keep this industry under surveillance to ensure that this type of conduct is not repeated by the respondents.”
The Commission has thus asked the Tribunal to declare the conduct of Netstar, Tracker, Matrix, Orchid and Bandit as prohibited practices and thus illegal.
During this investigation the Commission uncovered information suggesting other unacceptable conduct in this industry. In this regard the Commission initiated an investigation against 15 members of the VESA Mechanical Committee and the VESA Electronic Committee respectively for possibly colluding by agreeing within their committees in implementing agreements to fix minimum prices for VESA electronic alarm/immobilizer products and mechanical gear-lock products.
The investigation also revealed that these Committees communicated the same recommended minimum pricing structures to installation or fitment centers and agreed on sanctions to be imposed in the event that the installation or fitment centers sell below the recommended price. To the extent that the respondents are competitors in this market, section 4(1)(b)(i) which prohibits price fixing among competitors is contravened and to the extent that they are in a vertical relationship with the installation or fitment centers for the supply of gear-locks and alarms/immobilizers, section 5(2) of the Competition Act is contravened.
Commenting on the alleged conduct of the 15 manufacturers, Advocate Simelane stated that he is “shocked to see the kind of practices that occur in this industry, especially because price fixing and RPM are supposed to be no-go areas for industry players unless they have an exemption. This probably explains why it is so difficult for consumers to get better prices when it comes to vehicles and vehicle components. If one takes into account the other pricing matters that the Commission recently dealt with, such as the fixing of retail prices by car manufacturers and that of spare parts, it is unlikely that consumers would get better deals if we do not intervene soon enough.”
It its referral papers against the 15 manufacturers, the Commission has asked the Tribunal to impose a fine of up to 10% of the annual turnover on each of the 15 manufacturers should they be found guilty of these contraventions.
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ISSUED BY COMPLIANCE
INFORMATION MAY BE OBTAINED FROM:
Zodwa Ntuli
Divisional Manager: Compliance
Tel: 012 394 3188
Cell: 072 499 0962
Fax: 012 394 4188
E-mail:
The 15 respondents are:
Assa Abloy (Sa) (Pty) Ltd First Respondent
Diamond Lock International (Pty) Ltd Second Respondent
Excess Technologies (Pty) Ltd Third Respondent
Geman Automotive Components (Pty) Ltd Fourth Respondent
Grid Electronics (Pty) Ltd Fifth Respondent
Grip-Tech (Pty) Ltd Sixth Respondent
Multi Locking Security Systems Cc Seventh Respondent
Ramsay Engineering (Pty) Ltd Eighth Respondent
Digisec (Pty) Ltd Ninth Respondent
Goulas Electronics (Pty) Ltd Tenth Respondent
Mobile Tracker Distributors (Pty) Ltd Eleventh Respondent
Mobile Tracker Sa (Pty) Ltd Twelfth Respondent
Pfk Electronics (Pty) Ltd Thirteenth Respondent
Sanji Security Systems (Pty) Ltd Fourteenth Respondent
Shurlock (Pty) Ltd Fifteenth Respondent